Profitability Of A Railway Project Built Using The PPP Model By Use Of Monte Carlo Simulation;Case-Lunan High Speed Passenger Railway(Qufu-Linyi Section)

In recent years,the need for development of infrastructure and public facilities,as a significant factor of economic growth has equally increased in developing and developed countries.Government budgetary allowances are mostly insufficient in keeping pace with these needs.One of the options in finding new ways to finance the facilities of public interest are private investments through a network of contract agreements,widely known under the term public-private partnership(PPP).A public-private partnership represents a contract agreement between a properly authorized local,regional or state authority and a private partner with a clear share of responsibilities and risks with the purpose of fulfilling a given public need.The PPP agreements are complex and risky and therefore require adequate financial and social feasibility to determine whether the involved public and private partners are getting value for their money.This thesis uses a case study of' Lunan High Speed Railway project(Qufu-Linyi section)which is in Shandong Province in China.Due to this the thesis briefly talks about the development of PPP in China in general and in the infrastructure development.It captures my motivation for studying this since I can be able to apply it back in my home country of South Sudan.I discussed the various types of PPP structures and the one this case study uses which is the Design-Build-Finance Operate and Maintain(DBFOM)structure.The thesis also mentions in theory a few models used in analyzing the social and financial benefits of PPP projects and methods and models used in the assessment of profitability of projects using PPP arrangements.In the social analysis of the case study(Qufu-Linyi),an assumption had to be made for involvement of social funds in construction fees because the case study does not meet the required government minimum of 3%profitability on construction profits but could be able to make up for it from investment in other aspects of the project,mainly future profits comprehensive land investment.However,the main objective of this thesis is to ascertain whether it is profitable to invest in a PPP project.This is done by determining driving factors of the project.I did this by applying Monte Carlo simulation in a 1000 random scenario.From known past experiences of average 13%construction profit,the construction profit rate change interval is set to 8%-13%,8%of the most likely,so the use of unilateral normal distribution N(0.08,0.025)curve describes the probability of construction profits,construction profits in the(8%-10.5%)Probability is about 70%,10.5%-13%probability is 25%,higher than 13%probability of 5%for social capital.IRR(after tax)of the total investment is 5.08%and the probability of the getting this IRR is 70%,comprehensive land developments expect returns between 0%-20%,and probability of getting(5%-15%)profits is about 70%,which makes it profitable to engage in the project.Due to non-inclusion of rate of subsidies on electricity in the policy accurate operating cost could not be estimated,however if they are in the future incorporated,this will lead to more profits realized by the Public and private partners in this project.